Biennial Budget

Budget agreement suggests lawmakers may have learned lessons from the pandemic

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A new bipartisan budget agreement might prove that lawmakers learned a valuable fiscal lesson from the fallout of the pandemic, though there’s still potential for future and additional supplemental budgets.

The newest budget deal from Augusta, after much finagling and compromise, tops out at $8.5 billion, which would only grow spending by about $200 million more than the majority budget passed in March, and about $300 million less than the supplemental budget proposed by Gov. Janet Mills.

The most recent revenue forecasts suggest Maine will see a $940 million surplus over the next biennium, signaling a significant change in the way Maine plans its finances from just over a year ago.

Having already planned to spend nearly all of its expected revenues, the state had to pivot sharply when the pandemic hit last year. It found itself lacking spare cash while desperately needing to increase spending to help manage COVID-19. The governor even signed a curtailment order amid the pandemic to ensure the state could keep its budget balanced and pay its bills on time. 

It seems lawmakers in Augusta have learned their lesson and have planned to not spend nearly all of the state’s projected revenues over the next biennium before those revenues materialize.

The budget agreement passed unanimously in the Legislature’s Appropriations Committee on Sunday, but it did not come without compromise on both sides. 

The new budget will pay $300 per person in COVID-19 relief payments to approximately 500,000 Mainers who filed a W-2 last year— a compromise on a Republican effort to provide income tax relief to most Maine workers— with the aim of rewarding essential workers who did not stop working during the pandemic.

The payments will cost roughly $150 million themselves with $500,000 for their administration. Republicans had originally sought $300 million or more in tax breaks.

Also, a proposal to replace revenues lost due to the state’s proposed flavored tobacco ban, roughly to the tune of $32 million, was nixed from the final agreement. 

A compromise addition raised reimbursements for direct care workers to 125% of the minimum wage and another set aside $20 million for nursing homes still reeling from the pandemic.

Still, $8.5 billion is a tough pill to swallow. As illustrated in the above graph from Maine Policy Institute, the gap between the value of Maine’s fiscal year 2005 budget (adjusted for inflation) and real appropriations has only grown in recent years, to more than $1 billion.

The new budget would also meet the state’s school funding goal of 55% of education costs for the first time since it was required by a 2004 referendum. It would also send 5% of state tax revenues to cities and towns through revenue sharing. 

Mills praised the bipartisan deal Sunday night, saying that it made “important, meaningful, and historic progress.”

The budget will go for a full vote before the legislature on Wednesday.

About Nick Linder

Nicholas Linder, of Cincinnati, is a communications Intern for Maine Policy Institute. He is going into his second year of studying finance and public policy analysis at The Ohio State University. On campus, he is involved with Students Consulting for Nonprofit Organizations and Business for Good.

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